Starting your business is an exciting opportunity for you. It is a time for you to use your skills and knowledge to grow your wealth. No matter what type of business you are in or planning to start, it’s critical to form your business with a legal structure that offers benefits to your company. Creating a Limited Liability Company (LLC) is often a desirable first step. That process comes with costs, but there are some ways you may be able to reduce your costs, especially when forming an LLC in New York, where costs can be high, and business opportunities are often many.
LLCs in New York have a variety of fees associated with the creation and management of them. Some of these costs are unavoidable. For example, the state filing fee has to be paid, and there’s no way to avoid doing so if you want to maintain your LLC in New York. Other fees can be avoided or reduced with a few simple steps. Here is how to do that.
Use a Formation Service Instead of an Attorney
Hiring an attorney to establish your LLC in New York is an option, but it tends to come with higher-than-expected costs. Hiring an attorney offers some benefits, including very specific legal support for you and your business. If you have a complex business structure or you are not sure about liabilities in a challenging or complex field, working with an attorney ensures you get the best insight.
However, most people starting an LLC in New York do not need to use an attorney. Most often, lawyers are far more expensive than what you will pay for using an online formation service. You can register an LLC in New York online and pay much less, especially when you have a bit of help. Unless your situation is rather complex or you want the hands-on support of an attorney, and you’re okay with paying more for it, turning to a formation service instead makes financial sense.
A formation service helps you with just about every component of the process, ensuring you set up your LLC legally and according to the state’s requirements. This is a safe and viable way to establish your LLC in New York quickly and efficiently.
Appoint Yourself as a Registered Agent
New York requires that an LLC name a Registered Agent. This is a person, business, or service that will provide access to the company. That is, a Registered Agent is available 24/7 for business notices and legal documents that are sent to the company. If someone wants to sue your business, they will turn to this person or business address to send that information. This is also the entity responsible for receiving official government information.
Appointing a Registered Agent is typically the better option because it ensures there is no risk of not having proper access. However, you can appoint yourself as the Registered Agent to save money. Doing this means you take on more responsibility. You must be available to receive correspondence, for example, which is challenging if you are traveling. More so, if you do not live in the state where you are forming your LLC, that could be a problem. Your Registered Agent must have a physical address within the state of New York.
On the other hand, if you do want to reduce costs, appointment yourself as the Registered Agent could save you around $199 or more per year, as that’s the typical cost for these services. If you are aware of the state’s legal requirements regarding Registered Agents and meet those rules, you can do the work yourself and skip that formation cost.
Understand the New York Publication Requirement
In New York, you must meet publication requirements as a part of the process of forming an LLC. The law states that you must meet the following requirements:
- Publish a formation notice of your business in two newspapers;
- Run those notices for six consecutive weeks;
- One of the publications must be a daily newspaper located in the LLC’s county;
- One newspaper must be a weekly newspaper in the county;
- Additionally, you must have two corresponding affidavits of publication within the first 120 days of the LLC’s formation.
This can be an expensive and time consuming process. You cannot skip it, though. That is a critical factor to keep in mind. This is a mandatory requirement. However, there is a way to reduce some of the costs associated with the process.
One way to do that is to switch to a different county. The publication requirements are for a specific county – and some counties will have a much higher cost associated with these services than others. If you switch the county you are forming your LLC in, you reduce your costs.
For example, if you were planning to establish your LLC in Manhattan, you are going to pay much more for the service in just publication requirement costs than if you choose one of the smaller counties to form your LLC. Does it matter which county you operate in? From a business formation standpoint, it does not. You can still operate your business in Manhattan, but you will be potentially saving hundreds of dollars on the high publication counties by moving away from those areas.
File the Biennial Report Yourself
Every two years, the state of New York requires that every LLC file a statement called a biennial report with the New York Secretary of State. This report is a requirement. It helps keep the Secretary of State updated on the business’s ownership, management, and overall operations.
Here is the key to remember. Many times, companies will turn to an online service for this task. It makes sense – they do not want to miss the filing requirement and pay fees or have their LLC at risk. At the same time, they tend to have to pay a significant fee for using these services. You may think it is necessary to do that because most services do not communicate that you can do the filing on your own.
When there is a need for a legal process that is complex or one that is time consuming, it is worth using an online service to help you. However, that is not the case in this situation. It is a very simple process to complete this report and send it to the Secretary of State. It takes only minutes to complete.
There is a fee to be paid for filing your biennial report. That report cost is just $9. Now, if you hire a company to do that for you instead, you will likely pay 10 times that amount.
Get Your EIN Yourself
This is another example of a very simple process that you can handle on your own and save a significant amount of money as a result. Your Employer Identification Number (EIN) is a number given to an LLC by the IRS. It helps the IRS to recognize your business for tax reporting requirements (as well as other needs over time).
Here’s the problem. You could pay a significant fee if you hire a third party to get your EIN for you. Or, you can pay nothing, go to the IRS website, input some very basic information, and get your EIN within the next 10 minutes. Different online services and sites will charge you a fee to do this for you. There is no reason to pay that when you can do this step on your own.
Determine If Your Expenses Are Tax Deductible
One of the lesser-known ways to save money when forming an LLC in New York is to utilize tax deductions. Some of the fees you have to pay to establish and maintain your LLC could be a tax deduction, which means they work to reduce the taxes you have to pay on your earnings. Not all of your expenses are, but there are some that could be.
For example, the costs you incur when creating your business, such as costs related to market research, investigating various locations for your company, or becoming educated about market conditions, could be tax deductions for you.
When it comes to formation expenses, many of these are a deduction as well. This could include hiring services to help you with the formation of your LLC, costs such as using marketing consultants, travel costs, and advertising. If your business has at least two members, you can also deduct legal services as well as New York state fees associated with the formation of your LLC.
Forming an LLC Does Not Have to Be a Challenge
The value of creating an LLC in New York is worth paying full price for most of these services. Yet, with a bit of time, you can learn much more about the process and tackle some of the steps on your own instead of relying on a third party company to do the work for you. That helps to keep more money in your pocket and ensures your business remains financially savvy.
